- Stocks have upside over the next few months, according to Morgan Stanley CIO Michael Wilson.
- Wilson cites a series of technical factors he says could contribute to a rally of 8% or so.
- In the longer term, he says falling profit forecasts and higher inflation spell major trouble.
After months of painful losses and unpleasant surprises, Morgan Stanley says investors are going to catch a break. Just a short one, lasting maybe two or three months — but that’s certainly better than another 10% selloff.
For a long time the firm has been predicting that high inflation and a potential recession were going to cause a lot of headaches for investors. That view hasn’t changed, but chief investment officer and head US stock strategist Michael Wilson says things will get a little easier through the end of 2022 or in early 2023.
Wilson says that long-term bond yields are now high enough to attract some money from investors, which will bring long-term interest rates down temporarily. The combination of lower rates, lower inflation expectations, and reduced valuations will provide some support for the stock market for a while.